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We are leaders in commercial, private client, and government law

中文     21st September 2020

9AM – 5:30PM

Monday to Friday

L7, 10-14 Smith St

Parramatta NSW 2150

(02) 9635 7966

Call Us

Share Sales

Buying or selling shares in a company involves a number of complex legal and commercial issues.

It is important that parties receive appropriate legal advice with respect to the preparation of legal documents and completion of the share sale.

Our specialist commercial lawyers at MatthewsFolbigg can assist you.

What is a share sale?

A share sale involves the sale of shares in a company to a purchaser.  This may occur by:

  • the company issuing new shares to the purchaser; or
  • one or more existing shareholders transferring their shares to the purchaser.

How is it different to a sale of business?

A sale of business involves the sale and transfer of the individual assets of a business to a new owner, whereas a share sale involves a change in ownership of the company which owns the assets.

What is a preliminary agreement?

Before the parties enter into a binding legal agreement, they will usually document the ‘in-principle’ agreement in the form of a preliminary agreement (also known as a ‘letter of intent’, ‘heads of agreement’, ‘memorandum of understanding’ or ‘term sheet’).

The preliminary agreement will deal with such matters as the proposed purchase price and the number and class of shares to be sold, and will be incomplete in some respects.  It is important to consider whether most of the terms should be expressed as non-binding and ‘subject to contract’ (in any event, certain provisions should be expressed to be binding, such as confidentiality and exclusivity of negotiations).

What is due diligence?

Due diligence (DD) involves enquiries and investigations into the company. Prospective purchasers should complete DD prior to entering into a binding commitment to purchase the shares.

Due diligence is important in share transactions, as any pre-existing liabilities of the company (such as tax liabilities or litigation) will continue to affect the company post-completion, thereby diminishing the value of the shares.

Whereas financial DD is concerned with properly identifying and valuing the assets and liabilities of the company, legal DD involves an examination of:

  • the corporate affairs of the company, its record-keeping and compliance
  • title to the assets of the company and any encumbrances over them
  • employee entitlements, superannuation liabilities and workplace claims
  • any litigation or claims affecting the company
  • licences and key contracts held by the company

What terms are usually included in the share sale agreement?

The parties should carefully document their agreement in the form of a Share Sale Agreement.  The parties should not rely on a ‘standard agreement’ but instead should have a custom-made agreement which is tailored to the transaction in question.

The contract will deal with such matters as:

  • the duties and obligations of the parties
  • the purchase price and adjustments
  • conditions to completion
  • documents and records to be handed over on completion
  • warranties and indemnities
  • limitation of liability
  • grounds for termination
  • post-sale restrictions on the seller
  • dispute resolution

What steps are involved in completion?

Completion (also known as settlement) is the fulfilment of the sale and purchase of the shares.  It may occur at the same time as contracts are exchanged, or at a later date after the fulfilment of the conditions to completion.

In relation to the sale and purchase of shares, completion involves:

  • ensuring that all conditions to completion have been satisfied or waived by the parties
  • payment of the purchase price and handover of documents and records
  • issuing/transferring the shares and registering them in the name of the purchaser
  • notifying ASIC of changes to the company

How can we help?

MatthewsFolbigg’s commercial lawyers are experts in share transactions.  We have assisted both purchasers and vendors, across a vast array of industries, to achieve their commercial goals.

We have a team of solicitors, including accredited specialists in business law, who can provide you with practical and succinct legal advice and assistance.


We serve all of the legal needs of individuals, government and businesses, regardless of their complexity, throughout all of Sydney and beyond.

We are industry leaders, and we never lose sight of the outcome that you want. We guide you through the legal process to achieve that outcome.

Our growth and our success, comes from the growth and success of our clients.

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